One of the Best Agriculture Businesses You’ve Never Heard Of

There are a lot of companies in the stock market that are doing far better than the main stock market indices. Any track record that is consistently beating the S&P 500 is, for me, definitely worth further investigation.

These days, the stock market is focused on corporate earnings and, to a lesser extent, fiscal policy in Washington. My view on fourth-quarter earnings season is that corporations are doing a good job maintaining their earnings, while the revenues outlook is single-digit this year.

One trend that I think has fallen off the radars of the media and investors is the commodity price cycle. It is very much alive and well, and it is now experiencing another major transformation. The commodity price cycle began with the major move in oil prices, later transitioning to gold and other precious metals. Now the cycle is moving into agricultural commodities, partially due to the weather, but mostly due to supply and demand. The best move in real estate the last few years hasn’t been a discounted condo in the Sun Belt; it’s been farmland in the mid-West. Farmland is going up in price everywhere—it’s going up big time. And the transition in the commodity price cycle is about to provide huge wealth-creating opportunities for investors, with strong earnings on the stock market and other investments. In fact, the wealth creation is already happening.

When it comes to the stock market, the one thing I covet is consistency—consistency of revenues and earnings growth, and consistency of price performance on the stock market itself. One company with a great long-term track record in agricultural commodities is Bunge Limited (NYSE/BG); it’s one of the best global agriculture businesses you’ve never heard of. Based in White Plains, New York, Bunge purchases, stores, processes, and transports oilseeds, grains, soybeans, canola, wheat, corn, and even sugarcane. If it’s related to agricultural commodities, Bunge has probably been involved somewhere along the line.

On the stock market, Bunge is one of those consistent wealth creators that I like. It certainly is not a high-flying technology stock, but there are very few of those left anymore. Bunge spiked on the stock market in 2007/2008, then corrected along with everything else. Its stock market recovery has been consistent, and its 2012 third-quarter earnings grew to $297 million, or $1.92 per diluted share, compared to $140 million, or $0.89 per diluted share, year-over-year. The company reports its fourth-quarter earnings next week. Bunge’s stock chart is below:

Special: Retire on this One Hot Stock This stock shot up from $46 to $73 after its IPO. Now, because a government-sanctioned cartel of an industry related to this company just collapsed, the stock's price has fallen off a cliff. This mistake remains uncorrected and a $15 price tag is unjustly hung on the stock—just when it's about to soar! To get the full story on the stock that's about to pop 1,295%,... click here now.

Chart courtesy of www.StockCharts.com

I have a strong inclination that agricultural commodities and related industries are going to do very well throughout the rest of this decade. (See “Agriculture Stocks—These Two Are Doing Very Well on the Stock Market.”) Inflation, global warming, supply and demand, and scarcity all favor the commodity price cycle’s transition into this last remaining group. Countless companies related to agribusiness are now turning higher on the stock market, and corporate earnings within the sector are excellent.

There is a cycle when it comes to commodities and resource investing. There’s even a cycle of enthusiasm among institutional investors. Probably, the most attractive investment in agriculture today is not on the stock market, but in real, high-quality farmland. Of course, not every investor can go out and purchase 1,000 acres.

It has been decades since individual farmers experienced meaningful wealth creation from the land, but this is now changing. The great thing about farmers doing well is that they typically reinvest all their earnings back into the land, new equipment, and technology on a local scale. The commodity price cycle is alive and well, and it’s transitioning into agriculture. I think we’ll see substantial earnings strength from this sector over the next several years.

Mitchell Clark is a senior editor at Lombardi Financial, specializing in large- and micro-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, including Micro-Cap Reporter, Income for Life, Biotech Breakthrough Stock Report, and 100% Letter. Mitchell has been with Lombardi Financial for 17 years. He won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was a stockbroker for a large investment bank. In the... Read Full Bio »

Where Lombardi Analyst Mitchell Clark Says Investors Should Focus in 2015 for Safest, Best Returns

Forecasts Mar. 3, 2015

Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the metal.

Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., our concern is slower world economic growth will negatively impact revenue and earnings growth of American companies, pushing equity prices lower.

Estimates Mar. 3, 2015

Trailing 12-month EPS for Dow Jones companies (Most Recent Quarter)

$1053.20

Trailing 12-month Price/earnings multiple (Most Recent Quarter)

16.92

Dow Jones Industrial Average Dividend Yield

2.21%

10-year U.S. Treasury Yield

2.13%

Poll

Will the rising U.S. dollar hurt corporate earnings of American companies?

Resources

Categories

Follow Us

Dear Reader: There is no magic formula to getting rich. Success in investment vehicles with the best prospects for price appreciation can only be achieved through proper and rigorous research and analysis. We are 100% independent in that we are not affiliated with any bank or brokerage house. Information contained herein, while believed to be correct, is not guaranteed as accurate. Warning: Investing often involves high risks and you can lose a lot of money. Please do not invest with money you cannot afford to lose. The opinions in this content are just that, opinions of the authors. We are a publishing company and the opinions, comments, stories, reports, advertisements and articles we publish are for informational and educational purposes only; nothing herein should be considered personalized investment advice. Before you make any investment, check with your investment professional (advisor). We urge our readers to review the financial statements and prospectus of any company they are interested in. We are not responsible for any damages or losses arising from the use of any information herein. Past performance is not a guarantee of future results.